Advisers give levies lukewarm reception

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Advisers have reacted with a mixture of anger and resigned acceptance to news they could face annual levies of as much as $1,715 to fund the Financial Markets Authority (FMA).

Tuesday, June 14th 2011, 7:16AM 6 Comments

by Benn Bathgate

"You can't print what I think," said Cooney Financial Services David Cooney.

"Personally, I don't see why AFAs and the rest of the industry should have to fund a Government department. It's outrageous."

Cooney said that while he wasn't completely opposed to paying a levy, the figures mooted in the Ministry of Economic Development (MED) discussion paper were a lot higher than he expected.

"I'm not in favour of the levy as its been indicated that it's likely to be. I'm not opposed to paying a fair and reasonable charge though. It'll be interesting to see what value we get from the levy, I struggle to see that there's any upside for advisers, we're effectively paying the police aren't we?"

Cooney also said the levy wasn't the only additional charge advisers face in the wake of the new regulations.

"Once the public's aware we're all members of disputes resolution schemes, I suspect there's going to be an encouragement for people to go down that track [towards litigation]. We're going to see PI cover increase as more litigation takes place, so it's not the only increase of charge we're going to be faced with in the new regime."

PAA chief executive Edward Richards also said the additional cost comes at a bad time for the industry and could have the unintended double-whammy consequence of forcing existing advisers out of the industry and discouraging new participants.

"It's never easy to swallow another Government-imposed cost at such a difficult time," he said.

"The entry cost to the industry has just increased a bit more, and experienced advisers might be thinking of moving out of the industry whose experience is incredibly valued. In some cases for some of them, a few more are going to exit."

Another potential consequence Richards sees is a reduction in the number of advisers belonging to professional bodies.

"People are going to be looking around at saving more costs in their businesses."

Edwards fears advisers may quit professional bodies is borne out by Cooney, who said he was currently a member of two bodies but will "definitely drop one."

Coltman Investment Services Peter Coltman said the figures being mooted were actually below his initial estimates.

"It's not as bad as I thought. If you went back 12 months I thought we might be up for somewhere between $2,000 and $10,000."

"I'm not frightened by that, I imagine there might be a few that are," he said.

For Dennis Green & Associates Dennis Green, the opposite is true.

"I thought initially it was going to be under $1,000, it's almost double that."

Green also said he feared the additional costs would be passed on to the consumer, a situation Richards said would be bad news for the advice industry at a time when the Government is seeking to raise savings and financial literacy.

"The Government says taxpayers aren't going to pay it, the industry's going to pay it, and the industry says to some extent we'll have to pass this on to the consumer," Richards said.

"So that means increasing bank fees, increasing premiums, I'm not saying it will but there's potential, all these things have to be fed into the administration of financial services. This is not good for the advice industry."

"We have an underinsurance problem in this country, and we have not enough people seeking and valuing financial advice, and this is just another disincentive."

Green did find one positive about the FMA budget however.

"They have reduced their massages and morning teas. They've saved $60,000 or somewhere around that."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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